ET Now: The Finance Minister has already gone abroad, convinced the global investors, but of late the global mood or rather the risk on mood seems to have gotten a little wobbly. How is he going to please the investor community?

Nilesh Shah: The Finance Minister has gone to eastern side of India before the budget and he is going to the western side of India after the budget. So clearly he is going to give a good budget and then go and greet the investors. Second, in spite of the risk-off trade, which is going on right now, FIIs are still bringing in money. We are receiving net inflows of $4 billion virtually since November. Year to date, we are up $8 billion and if in the risk-off kind of mode we are getting $4 billion, imagine what we will get on a risk-on side. In the budget, the Finance Minister has to deliver two things. Control the deficit which he has promised to investors - 5.3% for this year, 4.8% for next year and revive growth by reviving investment. If these two things are met, then probably the markets will greet the budget like the FIIs are greeting the FM's commitment on the fiscal side. So net-net, a good budget should be expected.

ET Now: What exactly will the markets focus on? Do you think they will focus on a tight fiscal deficit number or ultimately it is all about growth? Because in order to balance the fiscal deficit, the Finance Minister will have also have to reduce expenditure and if he decides to go easy on expenditure, that will have an impact on growth. India is always a growth story. So a good fiscal deficit number is fine, but if growth slows down, that could derail the India story.

Nilesh Shah: The market will always be greedy. If the fiscal deficit is delivered, they will focus on growth. If growth is delivered, they will focus on fiscal deficit. I do not think it is always possible to satisfy everyone. But clearly we need a budget which balances fiscal deficit first because you have gone out and committed 5.3% and 4.8% fiscal deficit numbers to people. Obviously the market is smart enough to look at how this number is arrived at. Is it arrived by postponing subsidy reimbursement, is it arrived by controlling capital expenditure viz planned expenditure, then certainly that number will lose its value, but if it is arrived by increasing revenue and cutting wasteful expenditure, certainly the market is going to appreciate it. Growth is obviously India story. People are paying its premium over our peer group, viz Brazil, Russia, China, because we are growing at a faster pace and until growth can be revived, certainly the market is not going to like it.

ET Now: How do you think FM is going to make the market participants happy? Will he even venture into small gimmicks like STT or etc. or do you think this time around he is going to have a more populist approach and what he is going to please is the aam aadmi?

Nilesh Shah: The FM should focus on two things again -- keeping deficit under check and reviving investment to support growth. All other things like cutting STT or removing short-term capital gains tax, they are more a gimmick rather than supporting the fundamental things. What people want is how will you ensure that growth is sustained. For that you have to tax people who are not paying taxes rather than harass people who are paying taxes. You have to cut expenditure which is wasteful in nature. You have to create governance structure which can facilitate faster execution of project.

Two things which have worked well for India in the budget -- one was textile upgradations funds which was launched under the budget way back in the late 90s. It has pushed capacity creation in the textile sector, increased our market share in global exports market and created employment for millions of workers. Can we do something similar for a couple of industries? We all know power shortage is a big issue now. Can we create something for coal mining and solar power which then in future kind of controls my energy import bill? The second thing which worked well for the budget was related to ultra mega power project. Now obviously execution of ultra mega power projects has happened. Then there are issues related to non-viable PPAs, but at least power capacity addition jump started with the ultra mega power project policy. Now can we create national infrastructure projects where say Delhi, Mumbai industrial corridor is put up on website everyday what progress is made, a hall of shame created for people who are not executing it fast, and a hall of fame created for people who are executing it fast? Put 10 projects on fast track and deliver it. Suddenly we will see the economic taking care of the market rather than trying to please the market with cut in STT or something like that.

ET Now: Do you think more imperative than the fiscal deficit target itself is the math as to how the finance minister derives it today because next year is not really that important, he may not even be there to present the budget?

Nilesh Shah: Definitely. The quality of fiscal adjustment is very-very critical. Is the fiscal deficit being arrived by postponing reimbursement of subsidies, that is not what is going to be accepted by the market. Is the fiscal deficit being arrived at by having unrealistic expectations and growth as well as expenditure, that is not what is going to excite the market. What people are looking forward is a straight simple budget which takes care of the realities. Fortunately for the next year, the headwinds are in favour of the finance minister. We have controlled planned expenditure significantly this year. The year-to-day planned expenditure growth is 9% versus budgeted 22%.

That money is going to be spent next year. That gives straight way jump to the GDP growth. Second, next year will be a pre-election budget. Pre-election always results into increased activity in economic terms. So second half of next year will be supported by that spending. Put together could we expect 0.5% to 1% GDP growth more because of these two factors? Yes. Your denominator goes up and revenue on the numerator also goes up, that gives you great leeway in terms of controlling your revenue. The finance minister can also look at some more gains from spectrum. This year it is wash out, but next year definitely it will be far more than what it is this year. You can also expect more dividend from PSUs. You can probably do what the railways are doing, trying to target Rs 4500 crores by selling scraps. We all know the government has lots of assets which can be monetised. Why not auction stamps, road names? If you want to have a wedding ceremony in Raj Bhavan, then go and pay for it.

ET Now: Wow! That is a great idea.

Nilesh Shah: Try to generate revenue like this. If Versailles Palace is available for marriage functions, why not Taj Mahal? Try to generate revenue through this kind of mechanisms and hopefully if revenue is taken care of, deficit automatically gets taken care of. You just need out-of-box thinking to generate money.